Last year was surprisingly hot – the second warmest on record – but it wasn’t just mercury that surprised on the upside. The bull market in risk assets gathered force, and as it continues we provide a five-factor risk outlook that could distract investors from the heat.
This month, NASA reported that 2017 was the second-warmest year since 1880, when reliable records began, confounding some predictions that the atmospheric coolant of a fading El Niño would take the edge off temperatures.
Global markets continued to run against the odds amid warnings about valuations. For example, last year the S&P500 gained in every month on a total-return basis, as did the MSCI All Country World Index, for the first time in 100 years. Similarly, the S&P500 completed its longest continual rise without a 5% or greater drawdown.
So far in 2018, the golden spell of weather in the markets has held, and many investors retain a sunny disposition. Consensus expectations for 2018 are for an ongoing Goldilocks-like scenario for the global economy, featuring solid growth, low inflation and accommodative monetary policies.